Op-Ed: Trudeau gets Trumped
The media loves a good soap opera between Prime Minister Justin Trudeau and President Donald Trump. The latest came in last-week’s Washington Examiner, which reported that a top White House official called Trudeau the “little punk kid running Canada.”
Despite this on-going theatre between the President and the Prime Minister, the two have a surprising list of similarities — spectacular hair, large family fortunes, massive budget deficits and a love of celebrity politics and Twitter diplomacy.
And Trump has much reason to be grateful to his northern neighbour. In their new trade deal, Trudeau “gave very graciously,” in the words of Trump’s economic adviser Larry Kudlow. The Prime Minister agreed to raise medication prices on Canadians by lengthening patent protections for U.S. drug companies. He effectively allowed the U.S. to veto future Canadian trade deals with certain “non-market economies”. He even agreed to impose new fines on Canadian dairy farmers who export too much to the United States.
He got nothing important in return that Canada did not already have. U.S. tariffs on softwood lumber remain, as do Buy America policies that shut Canadian companies out of state and local projects. Worse, there are now new tariffs on our steel and aluminum — maybe the first time in the history of trade that there are more tariffs in place after a trade deal than before negotiations started.
Trudeau’s domestic policies are also serving Trump’s most precious goal: to take money and business from Canada back to the United States. “We’re going to bring back probably $4 trillion from overseas,” said the President, who has since cut the tax that American companies pay when they bring home profits earned abroad, reduced their federal tax rate from 35% to 21% and allowed them to write off 100% of their investments in the year they are made, rather than gradually over many years as in Canada.
As the U.S. President works to take jobs from other countries, Trudeau’s policies have helped him do it. He has raised income taxes on taxpayers of all income levels — although Canada Revenue Agency data shows the wealthiest 1% is actually contributing $4.5 billion less —possibly because they are moving money out of our country. Furthermore, tax accountants confirm that sweeping tax increases and penalties on privately-owned businesses that Liberals proposed last year frightened many to move their assets elsewhere, especially the U.S.
The tax increases have only just begun. The Trudeau government plans to introduce carbon taxes and raise payroll taxes on employers and employees. In fact, the Parliamentary Budget Officer has calculated that the carbon tax will delete $10 billion from the economy. That money will go somewhere — perhaps southward.
And then there are new red tape and government obstacles to development.
First, the Trudeau cabinet vetoed Enbridge’s Northern Gateway Pipeline, which would have shipped western oil to the Pacific Coast to reach Asian markets — even though it already had National Energy Board approval. Coincidentally (or perhaps not), Enbridge went on to buy Texas-based Spectra Energy in a $28 billion deal. Canada’s loss. Houston’s gain. “Now, Enbridge is set to boost a record US$57.2 billion in cross-border spending by Canadian companies [in 2016], roughly five times the previous record of US$10.1 billion through Sept. 7, 2014,” calculated Bloomberg.
Second, the Trudeau government effectively killed the Energy East Pipeline, which would have transported a million barrels a day of western oil to eastern Canadian refineries. The government extended the consultation period for the National Energy Board’s review of the project by six months, beyond its already-exhaustive 21 months. It also changed the rules almost three years into the process to penalize the project not only for the greenhouse gas emissions from the pipeline itself, but also the emissions caused in the original production and the final consumption of the oil that flows through it. Six weeks later, the company finally gave up and cancelled the project altogether. Former New Brunswick Liberal Premier, Frank McKenna, called it a “glorious day for Donald Trump”, who won “an endless supply of Canadian oil for decades to come at a deeply discounted price… and a transfer of wealth from Canada.”
Third, delays and uncertainty about the TransMountain Project (which merely twins an existing pipeline) caused its owner, Kinder Morgan, to flee. But not before selling that existing pipeline to the Trudeau government for $4.5 billion — twice the pipeline’s book value. Soon after, the company announced it would invest $2 billion to build a natural gas pipeline in the U.S. — effectively using Canadian tax-dollars to build a pipeline in Donald Trump’s America.
To summarize: the day Trudeau took office three of the most respected pipeline companies in the world were ready to put shovels in the ground and build pipelines to ocean water — all three have now abandoned those projects.
Finally, the government has introduced bill C-69, which nearly doubles the timelines for proposed projects from 18 to 29 months and requires ill-defined studies of sociological issues before they can go ahead. A former TransCanada CEO called it an “an absolutely devastating piece of legislation”. Both he and the Canadian Energy Pipeline Association have said the bill would mean there will not be another pipeline built in Canada if the bill passes.
Not only would that allow Trump’s America to snatch our pipeline investment, but also to continue taking our oil at discounts of almost $40/barrel or half-price, at a cost of billions of dollars and thousands of jobs.
The result of Trudeau’s high-tax, anti-development policies is that Canadian investment in the U.S. jumped two-thirds ($36B to $60B) last year, while U.S. investment in Canada fell by more than half ($22B to $10B). Canadians invested six times as much in the U.S. as Americans invested in Canada last year. In the two years ended September 2018, the American S&P 500 outperformed the Canadian TSX60 by 11% annually — a multibillion-dollar loss of investment that esteemed finance professor George Athanassakos called the “Trudeau effect”.
Don’t believe him? Ask Finance Minister Bill Morneau’s old think-tank, CD Howe, which calculated that “… Canadian business will invest about $13,900 per worker this year, while in the United States the commensurate figure is $23,200.” And where money goes, so go jobs. In the first nine months of this year, Canada has created almost none during the same time period.
Our drama-teacher Prime Minister will no doubt make big theatre about “standing up” to Donald Trump on some issue as we get closer to the election. But as long as Trump can keep taking our money, oil and jobs, a little more drama from Trudeau will just make the U.S. President chuckle.
Shadow Cabinet Minister for Finance
Conservative Party of Canada